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Stimulus packages can save Australia: IMF

THE outlook for the international economy has been downgraded
significantly, raising fears that Australia's already bleak
unemployment, revenue and growth forecasts will deteriorate
further.

The latest outlook published by the International Monetary Fund
last night says the global economy is expected to contract this
year for the first time in 60 years.

It also backs the stimulus packages introduced by many
governments, including the Commonwealth, but says recovery depends
on further action.

"The estimated growth and employment effects from the fiscal
stimulus announced so far are estimated to be large," the IMF
says.

In late January it forecast global growth to slow to 0.5 per
cent this year - the worst result since World War II - before a
possible recovery to 3 per cent next year.

Last night it revised growth to go backwards by 0.5 to 1 per
cent this year and to stage a modest and heavily conditional
recovery of 1.5 to 2.5 per cent next year.

The figures were given under embargo to finance ministers,
including the Treasurer, Wayne Swan, at last week's Group of 20
summit in London. They will underpin talks when the G20 leaders,
including the Prime Minister, Kevin Rudd, assemble in the city on
April 2.

Government insiders expressed fears the new report meant the
forecasts contained in the mini-budget last month were no longer
feasible.

The 7 per cent unemployment rate forecast for June next year is
certain to be revised upwards, and more quarters of contraction -
worsening an official recession and bigger deficits - would
eventuate.

The IMF says advanced economies will suffer "deep recessions"
this year, and forecasts growth in the US, Europe and Japan will be
slower than it had predicted. The Government will take political
comfort from the IMF's view that recovery depends on further policy
actions along the lines of those already taken in Australia,
including measures to buttress the banks and stimulate the economy
with packages equivalent to 2 per cent of GDP.

"Turning around global growth will depend critically on more
concerted policy actions to stabilise financial conditions as well
as sustained strong policy support to bolster demand," it says.
"However, in the event of further delays in implementing
comprehensive policies to stabilise financial conditions, the
recession will be deeper and more prolonged."

Mr Rudd was blunt when he cited Wednesday's World Bank report,
which downgraded its growth forecast for China this year from 8 per
cent to 6.5 per cent. "There are very large numbers with a global
significance," he told Parliament. "China is Australia's largest
trading partner."

The Opposition stepped up its criticism of the Government's
handling of the economy.

"Every step you have taken has made things worse," said the
Opposition Leader, Malcolm Turnbull. "Your incompetence is a
disgrace."

He likened the Australian Business Investment Partnership, or
so-called Ruddbank - designed to plug funding gaps in commercial
property - to a return to the Labor state bank fiascos of the 1980s
that exposed taxpayers to failed commercial property ventures.

"Talk about a dog returning to its own vomit," Mr Turnbull
said.

Mr Rudd said the IMF figures would expose his opponent as
existing "in a universe completely disconnected with what is
actually going on in the global economy and its roll-on
consequences for Australians, their jobs, their families and their
communities".